General equilibrium with monopolistic firms and occasionally binding cash-in-advance constraints

Arbeitspapier

We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully .exible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind.We establish the conditions under which money has real effects and demonstrate that an equilibrium that occurs at a binding CIA constraint is welfare inferior to any equilibrium that occurs at a nonbinding CIA constraint with the same level of technology. We argue that even though the probability of a binding CIA constraint can be increasing with money supply, under certain conditions, expansionary money supply is welfare improving.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Cardiff Economics Working Papers ; No. E2010/6

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Price Level; Inflation; Deflation ; Demand for Money ; Money Supply; Credit; Money Multipliers
• Subject: cash-in-advance ; general equilibrium ; monopolistic competition ; Monopolistischer Wettbewerb ; Konditionen ; Geldangebot ; Allgemeines Gleichgewicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dixon, Huw ; Pourpourides, Panayiotis M.
• Event: Veröffentlichung
• (who): Cardiff University, Cardiff Business School
• (where): Cardiff
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/65756
• Last update: 10.03.2025, 11:42 AM CET